Blog by Kevin Wong

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U.S. Existing Home Sales Rise; Prices Fall

Sales of previously owned U.S. homes rose more than
expected in March, a trade group said on Wednesday, suggesting the
housing market's downward trend may be close to hitting a bottom.

The
National Association of Realtors said sales rose 3.7 per cent month
over month to an annual rate of 5.10 million units after an upwardly
revised 4.92 million unit pace in February.

Economists
polled by Reuters had expected sales to rise 2.5 per cent to a 5.0
million-unit pace from the previously reported 4.88 million unit rate.
Sales have now risen in six of the past eight months.

"It's
slow, steady progress, but you cannot not be disturbed by the slow pace
of recovery," said Pierre Ellis, an economist at Decision Economics in
New York. "Demand is rising even with higher mortgage rates so that's
encouraging."

The housing market is struggling to find its
footing as a wave of foreclosed properties keeps supply elevated and
prices depressed.

Last month, foreclosures and short sales,
which typically occur at about 20 per cent below market value,
accounted for 40 per cent of transactions. That was the highest since
April 2009 and was up from 39 per cent in February.

The
median home price fell 5.9 per cent in March from a year earlier to
$159,600. Compared with March last year, sales were down 6.3 per cent.

"A
sustained turnaround in the housing market is still far off based on
earlier-released depressed readings for housing starts, building permits
and builders' confidence indices," said Krishen Rangasamy an economist
at CIBC World Markets in Toronto.

MORTGAGE APPLICATIONS UP

A
separate report on Wednesday showed demand for home loans rose last
week, as interest rates eased and purchase activity picked up. The
Mortgage Bankers Association said its purchase index rose 10 per cent to
210.8, the highest since early December.

Last month,
all-cash purchases made up a record 35 per cent of sales in March and
the NAR said the lower and upper ends of the market were showing strong
activity, with the middle part -- which accounts for the existing
housing market -- remaining sluggish.

Sales last month rose
across the board, with multifamily dwellings rising 1.6 per cent and
single-family home units advancing 4 per cent.

At March's
sales pace, the supply of existing homes on the market slipped to 8.4
months' worth from 8.5 months in February. However, the number of
previously owned homes on the market rose 1.5 per cent to 3.55 million.

A supply of between six and seven months is generally considered ideal, with higher readings pointing to lower house prices.